MP questions whether FSA withdrew pensions from Equitable Life

Liberal Democrat MP for Eastbourne Stephen Lloyd has questioned whether the FSA withdrew its pensions from Equitable Life when it became aware of the problems within the firm.

Lloyd told Parliament yesterday during a debate about compensation for Equitable Life investors that a representative of the Equitable Members Action Group informed him that the FSA had prior warning of the state of Equitable and withdrew its investment.

He said: “I had a meeting with EMAG yesterday, and one of its representatives told me that – I cannot vouch for whether this is absolutely true – that because the regulators apparently knew a good few years before the company hit the buffers that its financial model was in such a poor state, withdrew their pensions from the Equitable Life package.

“If that is true, it is absolutely disgraceful. It demonstrates what an atrocious job they did and emphasises that there is a very strong moral case for the payment of fair and appropriate compensation, irrespective of the financial challenges we face.”

The Parliamentary Ombudsman’s enquiry into Equitable Life recommended compensation be paid to investors due to Government maladministration. The compensation suggested was between £4bn and £4.8bn.

The independent report by Sir John Chadwick has recently recommended that compensation of as little as £400m be paid.

A spokesman says: “The FSA has never engaged Equitable Life to provide pensions to new employees. The FSA’s self-administered occupational pension scheme is managed by a separate trustee company that is responsible for managing the assets of the scheme and appointing the investment managers.”

Money Marketing understands that there may have been an Additional Voluntary Contribution scheme available to FSA staff who joined from previous regulators.

If the Government can rightly pay compensation for the failure of numerous regulators such as the FSA then should they not also pay compensation for all the other failures by the FSA (banking crisis etc.)?

Why pay in once case and not another?
These people (the regulators) were very highly paid after all, but none of them have suffered or had to pay for their mistakes unlike the Equitable Life victims.

Where is the justice in that. No accountability whatsoever and we need to bring back accountability otherwise it is just going to be a never ending stream of compensation after compensation.

As I recall, only a month before its collapse, the FSA approved Equitable’s application to market stakeholder pensions.

At the time, my comment on the FSA’s failure to take action against Equitable was that because by the time it realised the seriousness of the situation it was too late to do anything to prevent what by then was an inevitability. So instead, the FSA just stood back and looked the other way. It’s good at that.

Now, it seems, evidence of this having been exactly what happened seems to be emerging. But has anyone at the FSA ever been called to account for what must surely constitute gross regulatory negligence? Seen any flying pigs lately?

I am very sceptical about this. The EMAG member making the allegation should put up or shut up. He could very easily cite the source. Sounds to me like a gullible MP is being wound up. Try as I might I can’t think of a reason why I or any other taxpayer should bail out the members of a mutual society who chose to believe the rash, irresponsible and undeliverable promises made to them by their own employees.

I am sure we all recall the FSA warning to advisers not to move clients from Equitable Life at a time when the MVA was relativelt small. It later widened and many clients who subsequently transferred out were disadvantaged.

As most people will recall the Equitable Life dealt with many of the top 100 companies schemes AVCs or otherwise and certainly a number of high profile Public Sector AVC arrangements.

Now when the FSA knew EL was going down the pan, perhaps the stampede for the exit would have sunk the company and therefore nothing was stated so to avoid that scenario.

However, no doubt they moved their own scheme/s from them, which if truth be known, any advisor worth his salt with such insider knowledge would also have done so you could say that whilst the FSA is morally bankrupt, it was acting in the best interest of its members.

If they hadn’t done such they would have been criticised anyway by their own members.

Whilst I am no fan of the FSA, we should stop using this and other websites for simply criticising the FSA.

Absolutely true, I remember reading the press at the time.
I would also point out that a lot of MP,s and a large number of the legal profession had either FSAVC or pension plans with Equitable, hence the pressure that is being applied at present. Compensation for greed i think not as far as they are concerned.
Have we not compensated the MP’s enough with their expenses

At last and MP who asks the right question. I have just sent him a mail to provide him with additional background info (I used to work for ELAS) as well as asking him if he will also look at what the MPs did in respect of their own membership of the ELAS AVC scheme…and the senior civil service and many other Gvt entities.

I met a man in a pub yesterday, and he told me that Stephen Lloyd once went to an RSPCA shelter and mowed down a hundred kittens with a machine gun, but I can’t vouch for whether that’s absolutely true.

If EMAG actually knows this, then why are they muttering about it anonymously to MPs instead of shouting it from the rooftops?

There are a number of issues here which need to be separated out the main ones being:

1) It was patently clear to anyone with a grain of sense that the Equitable marketing of their ‘no commission’ structure was no different than buying a Bankassurance product. They employed hundreds of highly paid people to sign up the ‘punter’ since that is about the level of the so called ‘sophisticated’ people they targetted – judges, barristers, mp’s, accountants, solicitors etc – all of whom should recognise if a deal sounds too good to be true then it probably is and should have asked more questions.

2) They didn’t lose all of their pensions but they didn’t get as much as they hoped for – welcome ot the real world like everyone else who invested money in a with profit/equity linked product – values can go down as well as up and they should read the small print – and the so called professionals are more capable of this than most aren’t they?

3) They are no more entitled to compensation than the victims of any other company that goes down the tubes whilst authorised by the FSA or any other body.

4) There is no compensation for the failure in the Banks and subsequent market disruption leading to losses of money invested by shareholders in the Banks (which failed whilst regulated by the FSA) and in the stock markets as well as massive hit for some mortgage borrowers who had rates hiked by lenders who had funding problems some of whom lost their homes.

4) The ELAG are just trying to feather their own nests at other peoples expense. I for one object to them getting compensation for their own stupidity in buying into a too good to be true scenario many of whom should have known better.

5) The issue of insider dealing is completely separate and should be viewed as such.

6) If there is any truth that action was taken by the FSA or MP’s or other Government body that lead to the moving or withdrawl of funds prior to the whole thing blowing up then there should be an investigation. This should be to determine what action was taken, when, why and by whom.

7) If the investigation shows any dealings were taken as a result of inside information then the appropriate action should be taken against the individuals involved.

I remember the saem issue as Alan Lakey mentions earlier. I also have suspicions as to schemes being moved by Govt bodies away from Equitable before the proverbial hit the fan. Do I have any evidence? No because I didn’t have any clients with Equitable plans at the time (other than one or two in the NHS money purchase AVC with Equitable in unit linked funds and 1. The NHS AVC was not moved and 2. th unit linked contacts were not a problem and simply moved to Clerical Medical as many will remember)
Will anything every happen about this perceived insider dealing, even after questions from this MP? No… as there are to many at the top of the tree in the establishment who had their noses in the trough and walked away when they realised it was nearly empty….

I was in the briefing meeting with Stephen Lloyd. He got the timing of the transfer wrong. The move of all PIA staff persions was away from Equitable in June 1998 and is well evidenced in the Baird report (Oct 2001). By then GAD were more than worried by ELAS’s capital reserves since the society’s exposure to the shift in GAR/CAR rate caused concern because so much of ELAS’s business was pensions with embedded GAOs. Now what exactly are the correspondents above accusing my company of having misled??

Having reviewed the FSA arrangements for a client i know that they had a final salary scheme and also a MP scheme for employees – both run by Aon Ltd at the time. It is now run by Towers WAtson. So this is a non-story

The real story – which has been confirmed – is the BOE pension scheme selling all its equities holdings into gilts right before the credit crunch/ run on banks started hitting shares. No reason has been given for this switch to my nkowledge although it certainly is strange for a pension scheem to have no equities investments

I am personally convinced the regulators transferred their own pension funds away from Equitable in 1998, at a time they were well aware of the problems there. They simply omitted to alert the general public. Disgraceful behaviour! Stephen O’Brien MP asked questions in the HoC on January 20th & 28th 2003 about the transfer – see Hansard. Had the transfer not taken place, it would have been denied. It was not. QED